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GIC Public Hearing. February 3, 2011. Whats the Problem?. Budget pressure on state revenues versus state expenditures continues despite some improvements in the economy Were not out of the woods yet. - PowerPoint PPT Presentation

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  • GIC Public HearingFebruary 3, 2011

  • Whats the Problem?Budget pressure on state revenues versus state expenditures continues despite some improvements in the economyWere not out of the woods yet

  • Total health benefit cost per employee rises 6.9% in 2010, the sharpest increase since 2004 *Projected Source: Mercers National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) 1990-2010; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April) 1990-2010.

  • Disparities in Provider CostsAttorney Generals Investigation of Health Care Cost Drivers and Division of Health Care Finance and Policy hearings 3/16/10 Provider payment tied to market leverage and geographic isolation10 Massachusetts hospitals get 10% - 100% more than the other 55 for similar workPrice variations for hospitals and physicians offering similar services are NOT explained by quality of care, complexity of services/sickness of population or whether the hospital is an academic teaching or research facility

  • What Have Other Employers Done?Shifted costs to employees Implement high-deductible plans (example: $1,000-$5,000 deductibles before benefits begin)Institute co-insurance (example: member pays 20% of the cost of services)Eliminated retiree benefits

  • Among Firms Offering Health Benefits, Percentage of Firms That Report They Made the Following Changes as a Result of the Economic Downturn, by Firm Size, 2010*Estimate is statistically different between All Small Firms and All Large Firms within category (p
  • Average PPO deductible for individual, in-network coverage

  • Average Annual Worker and Employer Contributions to Premiums and Total Premiums for Family Coverage, 1999-2010* Estimate is statistically different from estimate for the previous year shown (p

  • Among All Large Firms (200 or More Workers) Offering Health Benefits to Active Workers, Percentage of Firms Offering Retiree Health Benefits, 1988-2010**Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2010; KPMG Survey of Employer-Sponsored Health Benefits, 1991, 1993, 1995, 1998; The Health Insurance Association of America (HIAA), 1988.

    Chart1

    0.66

    0.46

    0.36

    0.4

    0.4

    0.41

    0.35

    0.39

    0.36

    0.38

    0.37

    0.34

    0.35

    0.34

    0.31

    0.3

    0.28

    Sheet1

    19881991199319951998199920002001200220032004200520062007200820092010

    66%46%36%40%40%41%35%39%36%38%37%34%35%34%31%30%28%

  • National Health ReformAdded benefits and costs effective July 1, 2011Dependent expansion to age 26, regardless of dependents statusNo copays or deductibles for preventive servicesProjected added premium costs of 1%-2%

  • What Has the GIC Done to Deal with the Challenges?2004 - Instituted Clinical Performance Improvement Initiative: members pay lower copays for providers with the highest quality and/or cost-efficiency scores:Tier 1 (excellent) Tier 2 (good) Tier 3 (standard).Physicians for whom there is not enough data and non-tiered specialists are assigned a plans Tier 2 level copay

  • Other GIC InitiativesKept premium increases as low as possible (7.91% for FY11 and 3.19% for FY10) but, deficits caused mid-year deductibles and increased copaysIntroduced additional limited network plans: Harvard Pilgrim Primary Choice Plan and Tufts Health Plan Spirit

  • The States Budget Crisis$1.2 $2 billion structural deficit projected for FY12Causes: loss of $2 billion in one time funds, including $1.5 billion from ARRAEscalating health care costsTax revenues will increase slightly, but not enough to get us out of recession (and $1 billion less than FY09)

  • Chart1

    76

    4

    -4

    -25

    -27

    -38

    -49

    %

    Health Care vs Determinants of HealthGrowth in Massachusetts State Budget Spending FY2001 to FY2011(Inflation adjusted) Source: Massachusetts Budget & Policy Center Budget Browser

    Sheet1

    Calculations for Update of Fiscal Crowd Out Chart - Healthy People Healthy Economy Initiative

    T Hubbard 11-17-10All data from MA Budget and Policy Center Budget Browser - accessed 11-18-10

    revised 12-8/10

    See http://browser.massbudget.org/CompareCurrentYear.aspx?typ=PastCurrent&bgt=15,24,27,45&infl=CPI&c1=15&hf=PastCurrent#

    FY01FY11 (Current)

    $$% Change

    MassHealth and Health Reform665067411728561

    State Employee Health Insurance8421181422840

    Health Care Total7492792131514011.755207004376

    Public Health656,827492,2650.7494591422-25

    Higher Education137826010120390.7342874349-27

    Education

    Chapter 70375173940723411.0854542387

    Early Education and Care657146510233

    Elementary and Secondary Education622762423502

    School Building408154644349

    Education Total543980156504251.03871906344

    Environment and Recreation2854771786890.625931336-38

    Law and Public Safety235540422698910.9636949755-4

    Local Aid1,823,757925,2120.5073110069-49

    TOTAL STATE SPENDING29,389,66132,927,7151.120384307912

    SUMMARY% Change

    Health Care76

    Primary-Secondary Education4

    Law and Public Safety-4

    Public Health-25

    Higher Education-27

    Environment and Recreation-38

    Local Aid-49

    TOTAL STATE SPENDING12

    NOTE - DOLLAR TOTALS ADJUSTED FOR INFLATION - BY CPI

    (Amounts shown are actuals for FY2011, with FY2001 figures adjusted)

    Sheet1

    %

    Health Care vs Determinants of HealthGrowth in Massachusetts State Budget Spending FY2001 to FY2011(Inflation adjusted) Source: Massachusetts Budget & Policy Center Budget Browser

    Sheet2

    Sheet3

  • House 1s Requests to State AgenciesAll agencies asked to be part of the solutionCharge to the GIC Find solutions to preserve and protect current benefits with more enrollees and no additional dollars

  • House 1 Released 1/26/11$1,662,466,938 for FY12$1,645,669,744 for FY11Variance $16,767,194Doesnt include modest rate increases still in negotiation; or additional 1,800+ members from MBTA

  • The GICs PhilosophyDont choose a solution that just shifts all the extra costs to the enrolleesTry to lower costs instead

  • The GICs ApproachShare responsibility for reducing costs and improving quality providers, members, health plans, and the GICMaintain comprehensive benefits and choicePromote value of limited network plansAdopt only modest employee share increasesEducate members about provider performanceEncourage healthy behaviorMaintain retiree health benefits

  • Option1 Change Premium ContributionIncrease premium contribution ratios by 5% for all actives, retirees, and survivors = $82 millionAppropriation Act does not get done until June therefore, we cant change ratios until it is enactedLegislature made a 5% increase last year. Not likely to do it again.

  • Option 2 Limit Plan OfferingsLimit plan offerings, such as:Drop all broad network plansDrop all but one state-wide planDisruption and opposition from plans, providers, and enrollees (including legislators) would be extremeSome plans could go under

  • Option 3 Increase copays and/or deductiblesIncrease upfront deductible or go to high deductible plan designsEliminate the fourth quarter carry-over of the deductibleCould save up to $20 millionHowever, Deductibles very unpopularHurts sicker patientsDoesnt fit GIC principles

  • Option 4 Make the Buy-Out Program More AttractiveProposed legislation to add a mid-year buy out enrollment

  • Option 5: Re-Enrollment with Incentives to Choose Limited Network, Less Expensive PlansCounteracts inertia most employees do not change plans 2%-3% per yearFocuses attention on costs and savingsRewards state employees who become part of solutionPuts market pressure on high cost providersSavings depend on migration patterns

  • Option 5 Re-enrollment ContinuedSome negatives:Minor inconvenience for enrolleesMajor work effort for GIC and GIC Coordinators

  • Commission Vote of 1/27/11All state employees required to re-enroll in health insuranceOvercomes inertia most employees do not change plans 2%-3% per yearEmployees may be more likely to consider limited network placeIncentive offered to join limited network plans

  • Who Will be Required to Re-enroll?All active state employees who reside in Massachusetts and are covered by GIC health insuranceThe GIC will choose a plan for you if you do not re-enroll: Be proactive!Municipal members and state retirees and survivors will not need to re-enroll

  • State Employees Who Enroll in Limited Network Plans Will receive a three-month premium holiday if you enroll in:Fallon Community Health Plan DirectHarvard Pilgrim Primary Choice PlanHealth New EnglandNeighborhood Health Plan - NHP CareTufts Health Plan SpiritUniCare State Indemnity Plan/Community Choice

  • Provider Access and Plan Cost

    As of July 1, 2010

    GIC Employee/Non-Medicare Plan

    # Massachusetts Physicians

    # Massachusetts Hospitals

    Premium Cost

    Fallon Community Health Plan Direct Care

    5,000

    19

    $

    Fallon Community Health Plan Select Care

    12,700

    55

    $$

    Harvard Pilgrim Independence Plan

    24,200

    70

    $$$

    Harvard Pilgrim Primary Choice Plan

    17,900

    57

    $$

    Health New England

    6,500

    15

    $

    NHP Care (Neighborhood Health Plan)

    16,000

    63

    $$

    Tufts Health Plan Navigator

    22,400

    70

    $$$

    Tufts Health Plan Spirit